Post-transaction marketers Webloyalty, Vertrue, and Affinion have attracted criticism for solicitations that tend to deceive consumers. Their services typically entail recurring billing programs that promise a savings or discount, but actually charge users on an ongoing basis. They promote these services while customers are finishing the checkout process at trusted e-commerce sites -- a time when few users expect unrelated offers from third parties. Furthermore, they obtain consumers' credit card numbers from partner sites -- so a user may enter a billing relationship and face credit card charges without providing a card number to the company that posts the charges.

Presents "highly aggressive sales tactics [which] charge millions of American consumers for services the consumers do not want and do not understand they have purchased." (3) Concludes that post-transaction marketing practices "exploit consumers' expectations about the online 'checkout' process." (3) "Misleading 'Yes' and 'Continue' buttons cause consumers to reasonably think they are completing the original transaction, rather than entering into a new, ongoing financial relationship with a membership club." (3)

Reports that 35 million consumers have paid $1.4 billion for post-transaction marketing offers. (4) Of this $1.4 billion, $792 million was paid out to the merchant web sites that presented post-transaction offers. (4) Classmates.com received more than $70 million. (5)

Identifies the deception resulting from "data pass" automatic transfer of customers' credit card information from merchant to post-transaction marketer. (8) Citing FTC and NAAG authority and experience in telephone billing, notes that the act of typing payment information provides an indication of a consumer's willingness to enter into a transaction. (8-9) Reports companies' estimates that requiring customers to type their credit card numbers would reduce signup rates by a factor of 3 to 4. (21)

Chronicles the history of post-transaction marketers, including a series of state attorney general and class action lawsuits, as well as (for Affinion/CUC) overstated earnings giving rise to SEC investigations and imprisonment of company executives. (13-17)

Reports that post-transaction marketers pay a "bounty" of $10 to $30 when a customer responds to a post-transaction offer and becomes enrolled in a membership club. (19)

Presents low levels of consumer awareness of their memberships in post-transaction clubs. (22) Cites numerous consumer complaints. (23) Presents companies' training and scripts for customer service staff to respond to customer complaints, particularly complaints that customers do not know why they were enrolled. (25-27) Identifies high cancellation rates and low usage rates as further facts confirming that subscriptions were unwanted. (27-29)

Identifies efforts to shield merchants from customer complaints about post-transaction marketers, calling it a "strict no-no" to refer customers to the merchants who presented the offers. (29-30) Quotes selected complaints from customers who learned which merchants had referred them to post-transaction marketers. (31) Quotes a variety of complaints from merchants concerned about deception in post-transaction offers. (31-35)

A May 2010 Supplemental Staff Report explores post-transaction marketeters' efforts to avoid providing refunds -- including scripts to minimize the amount of money returned to consumers, denying refunds unless consumers used specific words in making their demands, and intentionally failing to notify consumers with multiple memberships (even when a consumer called to complain about one such membership).

Documents

In November 2009, the Senate Commerce Committee posted large multi-document files of materials obtained from post-transaction marketers and partner merchants. For readers' convenience, the documents are presented here in separate files with brief summaries.

Document 1 - A 1800petmeds staff person reports a "CEO mandate" to remove a deceptive Webloyalty button labeled "continue" (when in fact the customer had never started or requested any Webloyalty offer). Webloyalty staff oppose the changes, arguing that Webloyalty had provided 1800petmeds with "more than $516,000 in pure profit" in 2008.

Document 2 - In a proposal to a potential partner, Webloyalty describes alternative solicitations to customers. In a "card on file" implementation, a customer joins a Webloyalty program without providing Webloyalty with a credit card number. Webloyalty estimates $11 million of revenue to the merchant in this approach. In contrast, if customers were required to type their card numbers before joining Webloyalty, revenue would be far lower -- just $750,000.

Document 6 - A Webloyalty Senior Vice President reports eight items of feedback from Webloyalty merchants, including four different practices described as "misleading" and three different pieces of information described as "buried."

Document 8 - An online retailer complains of "angry call[s]" from customers the retailer referred to Webloyalty. The retailer describes Webloyalty as "unwilling" to share information about the extent to which customers in fact use Webloyalty services.

Document 9 - Enhansiv analyses the reasons why customers left Webloyalty programs. By a wide margin, customers most often report "did not authorize / was not aware" as their reason for leaving.

Document 10 - Classifies reasons for customers leaving Affinion programs. The most frequent reason was that the customer "disput[ed] enrollment."

In May 2010, the Senate Comerce Committee posted further documents revealing post-transaction marketers' strategies at "refund mitigation" (scripts to minimize the amount of money they returned to customers), "magic words" (denying refunds unless consumers used specific words in making their demands), intentionally failing to notify consumers with multiple memberships (even when a consumer called to complain about one such membership), and generally failing to follow applicable card network rules.

Victim Testimony

Testimony of Ray France, St. Cloud, FL - Former US Paratrooper and Purple Heart recipient suffered unwanted charges and overdraft fees as a result of a Vertrue program promoted on the Intelius site. Refund required numerous phone calls, a letter to the BBB, and an eight month delay.

Testimony of Linda Lindquist, Sussex, WI - After a purchase at Movietickets.com, Linda became enrolled in two Webloyalty programs and paid $320 of monthly fees. When Linda complained, the representative offered only a $20 refund. Linda obtained a full refund by complaining to Movietickets.com.

Expert Testimony

Testimony of Prentiss Cox, University of Minnesota Law School - Notes the special vulnerability of "vulnerable and distracted consumers" (2) including the elderly, disabled, and non-native English speakers. (4) Points out that customers do not expect charges from post-transaction marketers because customers do not provide their credit card numbers during the signup solicitation. (2-3) Flags the heightened deception of free trial offers and "negative option" rebilling and automatic renewal. (3) Identifies low usage rates as an indicator that consumers do not want the offered services. (4-6) Reviews limited and unsuccessful regulatory and litigation efforts to date. (7-8) Points out that public policy need not ask consumers to read confusing, hidden, or unexpected fine print. (8-9) Suggests that Congress prohibit "preacquired account marketing" wherein consumers enroll in paid programs without providing their credit card numbers. (9-10)

Statement for the Record of Benjamin Edelman, Harvard Business School - Argues that the timing, placement, and format of post-transaction offers deceptively suggest that
the offers are part of the checkout process. (3) Suggests that automatic transfer of consumers’ payment information removes a key warning that customers
are incurring a financial obligation. (3-4) Examines disclosures and finds them inadequate to cure the deception resulting from the substance, format, and context of the offers. (5) Points out that credit card network rules disallow key post-transaction marketing practices, and suggests that credit card networks enforce these rules. (6-7) Suggests that low usage rates support an inference of deception, and provides an empirical strategy to estimate usage rates from publicly-available sources. (7) Notes the inability of competition to cure this deception because customers do not understand the charges they face and therefore cannot choose merchants accordingly. (7-8)

Testimony of Florencia Marotta-Wurgler, New York University School of Law - Presents marketers' view that transactions are legitimate because all terms were somewhere disclosed. (2) Presents customers' view that such transactions are illegitimate because customers never provided payment details, because the fine print disclosures were deceptive, and because customers do not read fine print. (2) Notes the special deception of presenting a marketing offer when a consumer expects to receive a confirmation page. (3) Points out that customers are especially trusting on sites they already recognize, increasing the deception resulting from an unrelated offer on a known merchant site. (5-6) Flags the further deceptive characteristics of reward or rebate offers, and of offer design and positioning (including placing disclosures at the end of dense, unrelated paragraphs). (6-7) Suggests a prohibition on automatic transfer of payment information. Suggests that marketers be required to distinguish themselves from the sites customers asked to deal with. (7)

Testimony of Robert Meyer, Wharton School, University of Pennsylvania - Questions whether "post-transaction marketing" is actually marketing (as the term is used in ethical businesses and in business schools) in that little effort is made to convey product benefits, nor do vendors seek to build relationships with customers. (3) Identifies cognitive biases that make customers particularly vulnerable, and relates these biases to the academic literature. (8-13) Points out the special vulnerability of older consumers (with less online experience) and poor consumers (for whom rebates would be particularly attractive). (4) Notes that these deceptive marketing practices could undermine customer interest in legitimate online activities. (4) Calls post-transaction "surveys" a ruse in that they falsely suggest a consumer's main obligation (to receive a rebate or payment) is to complete a survey. (5) Suggests disallowing negative option renewals from free trials, and suggests disallowing automatic "hand-offs" of customers' payment information. (13-14)

Robert Meyer exhibits - Points out that post-transaction marketers' repeated use of merchants' name and logo gives customers a false sense that they are still doing business with the merchants they requested. Presents post-transaction marketers' meaningless surveys, as well as arrows and other design elements drawing customers' attention away from key disclosures. Shows "unpacking" of supposed program benefits to take more space, while disclosure of costs is squeezed into dense text customers are less likely to read. Flags the special problem of post-transaction offers that appear after a customer makes a purchase from an online information service, but before the purchased information is presented to the customer.

Edelman - various screen-capture videos and screenshots on file, available by request.